NEW YORK (Bloomberg) - Blackstone Group reached an agreement to buy New York's Stuyvesant Town-Peter Cooper Village, a deal that would put Manhattan's biggest apartment complex in the hands of the world's largest private equity firm and maintain some affordable housing at the property.

Blackstone, working with Canadian investor Ivanhoe Cambridge, will pay about US$5.3 billion (S$7.37 billion) for the 80-acre (32- hectare) enclave, said a person with knowledge of the agreement, who asked not to be named because the deal is private.

That's just under the record US$5.4 billion that prior owners Tishman Speyer and BlackRock paid nine years ago before defaulting on the mortgage in 2010 and walking away from the property, marking one of the biggest collapses in the last decade's real estate boom.

A sale to Blackstone would end five years of uncertainty over ownership of the complex, home to about 30,000 residents and one of the last bastions of affordable housing for middle-class New Yorkers. The deal includes an agreement with the city that would keep almost half of the more than 11,000 apartments affordable for 20 years, according to the mayor's office.

A final agreement was due to be signed on Monday night, with an announcement due today, the person said. The transaction includes about US$225 million in tax breaks offered by New York City, the person said.

Peter Rose, a Blackstone spokesman, declined to comment, as did Joe DePlasco, a spokesman for CWCapital Asset Management, which had been in control of the property on behalf of bondholders. Sebastien Theberge, a spokesman for Ivanhoe, didn't respond to an e-mailed request for comment after regular business hours. The company is the real estate arm of Canadian pension fund Caisse de Depot et Placement du Quebec.

Stuyvesant Town-Peter Cooper Village, located between 14th and 23rd streets on Manhattan's east side, was built in the 1940s by MetLife, with city assistance, to house World War II veterans.

Tishman Speyer and BlackRock handed the property over to lenders after its value plunged in the financial crisis and tenants successfully sued to stop a dramatic increase in some rents.

Now, apartments have led the five-year recovery in US commercial real estate values.

Prices for multifamily buildings are 33 per cent higher than they were at the previous peak in 2007, according to Moody's Investors Service and Real Capital Analytics.

The median rent in Manhattan was US$3,405 in the third quarter, the highest in records going back to 1991, data from Miller Samuel and Douglas Elliman Real Estate show.

Stuyvesant Town is "so big, it's so well located, there's still so much upside in it that someone is still going to make a lot of money if you hang in there," said Peter Hauspurg, chief executive officer of brokerage Eastern Consolidated, who isn't involved in the deal.

Daniel Garodnick, the city council member who represents the district where Stuyvesant Town is located, said that about 5,000 of the units will be preserved as "affordable" for 20 years, with a five-year phase-in of the rent increases. Another 1,400 units that have their rents regulated until 2020 will now be regulated until 2025.

Five hundred of the 5,000 units would be reserved for families making no more than US$62,000 a year, which would equate to a monthly rent of about US$1,500 for a two-bedroom apartment, said Wiley Norvell, a spokesman for Mayor Bill de Blasio.

The other 4,500 units would be for families making as much as US$128,000 a year, which would translate to about US$3,200 a month. The 1,400 units that will gain another five years of rent protection will see annual increases of no more than 5 per cent under the agreement, he said.

The Straits Times

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